United States District Court, Western District of Louisiana, Lafayette Division
HILL MAGISTRATE JUDGE
REBECCA F. DOHERTY, UNITED STATES DISTRICT JUDGE
Currently pending before the Court is a motion for summary judgment [Doc. 19], filed by defendant/counterclaimant/crossclaimant, the United States of America. Pursuant to its motion, the United States seeks a "judgment foreclosing its federal tax lien against the parcel of real property at issue, ordering that the property be sold according to law, free and clear of the liens and claims of the parties herein, and ordering that the net proceeds of the sale be paid to the United States on account of its tax lien, but only after [plaintiff] Cottonwood Development is reimbursed for the property taxes it has paid in relation to the property." [Id. at 1 ] For the following reasons, the motion is DENIED.
On April 8, 2013, plaintiff Cottonwood Development filed this suit, in state court, to quiet title to a parcel of real property located in Lafayette Parish, Louisiana, which plaintiff purchased at a tax sale in 2009. [Doc. 1-2] In its suit, plaintiff named the following defendants: Charles Walter Moter; the United States of America, Department of Treasury - Internal Revenue Service; the State of Louisiana; the Lafayette Parish School Board; and NCO Portfolio Management, Inc. The United States is the only defendant who has answered plaintiffs suit to date. On May 8, 2013, the United States removed the matter to this Court. [Doc. 1, p. 1] On June 10, 2013, the United States filed its answer, as well as a counterclaim against plaintiff, and a crossclaim against the remaining defendants to plaintiffs suit (i.e., Charles Walter Moter; the State of Louisiana, Department of Revenue; the Lafayette Parish School Board; and NCO Portfolio Management, Inc.), as well as three additional defendants, namely, IberiaBank; BEST Cleaning Service, Inc., d/b/a BEST Carpet Care; and Lafayette City-Parish Consolidated Government. [Doc. 8, p. 4] The United States has brought suit against the foregoing parties because "each of them may claim an interest in and/or a lien on [the] property upon which the United States seeks to foreclose its federal tax liens." [Doc. 8, pp. 5-6; see also Id. at pp. 8-9] By its counterclaim/crossclaim, the United States seeks to foreclose its federal tax liens upon the property at issue in this action, to sell the property, and to distribute the proceeds of sale in accordance with the rights of the parties. [Doc. 8; Doc. 19-2, p. 2]
The property at issue in this suit was formerly owned by defendant Charles Walter Moter. [Doc. 19-2, p.2] On June 2, 2003, an assessment of federal income tax, penalties and interest was made against Charles Walter Moter by the United States for the year 2002. [Id.] Pursuant to Internal Revenue Code ("IRC") sections 6321 and 6322, a lien for that year arose on June 2, 2003 and attached to Moter's undivided interest in the property at issue. [Id.] On March 30, 2004, in accordance with IRC section 6323(f), a Notice of Federal Tax Lien was filed against Charles Walter Moter in the mortgage records of the Parish of Lafayette. [Id. at 2-3] The Notice was refiled on February 22, 2013. [Id. at 3]
Due to delinquent property taxes owed by Charles Walter Moter to the Parish of Lafayette, the Sheriff for Lafayette Parish offered the property at a non-judicial foreclosure sale from May 6 through May 8, 2009. [Id. at 3] Notice of the sale was not provided to the United States in the manner mandated by 26 U.S.C. § 7425(c). Cottonwood purchased tax sale title to the property at issue and recorded its Tax Sale Certificate in the conveyance records of the Lafayette Parish Clerk of Court on May 21, 2009. [Doc. 19-1, p. 6; Doc. 19-16, Doc. 21-1, p. 1]
As previously noted, the United States now seeks a "judgment foreclosing its federal tax lien against the parcel of real property at issue, ordering that the property be sold according to law, free and clear of the liens and claims of the parties herein, and ordering that the net proceeds of the sale be paid to the United States on account of its tax lien, but only after Cottonwood Development is reimbursed for the property taxes it has paid in relation to the property." [Doc. 19, p. 1]
II. Applicable Law and Analysis
When a "nonjudicial sale" of property on which the United States has a lien occurs, and the United States has filed notice of its lien more than 30 days before the sale, the sale is "made subject to and without disturbing such lien. . . ." 26 U.S.C. § 7425(b)(1). Specifically, the pertinent provisions of the Federal Tax Lien Act provide as follows:
(b) Other sales.-... a sale of property on which the United States has or claims a lien ..., under the provisions of this title, made pursuant to an instrument creating a lien on such property
(1) shall, except as otherwise provided, be made subject to and without disturbing such lien or title, if notice of such lien was filed or such title recorded in the place provided by law for such filing or recording more than 3 0 days before such sale and the United States is not given notice of such sale in the manner prescribed in subsection (c)(1)....
(c) Special rules.~
(1) Notice of sale.-Notice of a sale to which subsection (b) applies shall be given (in accordance with regulations prescribed by the Secretary) in writing, by registered or certified mail or by personal service, not ...